Hummer Bid Puts Spotlight on Obscure China Firm

By NORIHIKO SHIROUZU

CHENGDU, China -- The Chinese bidder for Hummer says it plans to give the gas-guzzling vehicles new life by promoting the brand around the world, including China, and by investing in clean-engine technologies.However, little in the short history of Sichuan Tengzhong Heavy Industrial Machinery Co. suggests how it might pull off the turnaround of General Motors Corp.'s Hummer brand, a collection of rugged sport-utility vehicles based on the concept of the U.S. military Humvee vehicle.
Analysts said the deal could face major hurdles in getting official Beijing sanction because it conflicts with recent changes in China's industrial and environmental policies.
The company, which makes heavy commercial vehicles like dump trucks, is little known even among Chinese auto makers.
"'Who?' That's what I said to myself this morning when I heard the news," said a senior engineering executive at Changfeng Motor Co., a manufacturer of SUVs based in Hunan province. "I had never heard of the company before."

Tengzhong's headquarters, set among rice paddies an hour's drive south of the western Chinese boomtown of Chengdu, offer few clues. The spacious complex, a collection of production shops with dark gray siding and red trim, is protected with concrete walls and monitored by security cameras.
Chief Executive Yang Yi declined to disclose how much his company is proposing to pay for the Hummer brand, which thrived in an era of cheap fuel and conspicuous consumption but has since become a symbol of Detroit's commercial and environmental missteps.
According to estimates by analysts, Tengzhong is likely to pay $200 million to $300 million. Mr. Yang declined to provide any financial information about the company, saying it isn't obliged to do so as a private concern.
Mr. Yang wants to transform Hummer -- a U.S.-focused brand even though its vehicles are available in more than 30 countries -- into a global icon and expand its presence in China, where it sold 69 vehicles last year.
"The reason we are interested in Hummer is because we believe Hummer has great potential and future," he said. "Plus, we are very confident in the prospect of the auto industry in the global market, including the China market, as well as the development of the SUV market in China."
In a telephone interview Wednesday, where he spoke from Detroit, Mr. Yang talked with enthusiasm about a brand he said embodied the Chinese car owner's new spirit of adventure.
China Photos/Getty Images
Tengzhong's plant in an industrial complex near Chengdu, China, where workers make dump trucks and other heavy industrial vehicles.

Mr. Yang noted that despite the financial crisis, sales of SUVs in China are growing rapidly. SUVs are especially popular in mining and farming regions, such as Sichuan.
Initially, Tengzhong doesn't plan to bring radical change to Hummer and plans to retain Hummer's current management team, Mr. Yang said.
Hummer's chief executive, Jim Taylor, said Tuesday that Tengzhong plans to leave the bulk of the operations in the U.S.
In the longer term, to make the brand viable, Mr. Yang and his management team plan to pump money into the development of "new and cleaner" engine technologies, he said. The current Hummer gets about 15 miles per gallon.
Though Tengzhong is a privately owned company it has close government and party ties, according to analysts. It has expanded mainly through mergers and acquisitions, starting with Changdian Electric Co., a 40-year-old machinery company in Sichuan, in 2005, when it was established by a group of investors including the company's chairman, Chen Shi.
Mr. Yang was recruited as CEO in 2008. He was previously Communist Party secretary of a state-owned boiler manufacturer, according to a company representative.
Tengzhong would use a combination of its own funds and bank loans to finance its purchase, Mr. Yang said. The company has a memorandum signed with GM, he said, but hasn't obtained approval for the deal from the central government.
Analysts said there could be hurdles to official approval. For one, the Hummer is at odds with Beijing's policies encouraging small cars and new fuel-sipping or alternative-fuel technology, such as electric propulsion.
Analysts said the deal may also ring alarms among central-government industrial-policy makers who are pushing for an accelerated consolidation of the country's highly fragmented auto industry, where well over 80 auto makers of all sizes are competing to survive.
In Chengdu, residents appeared amazed at the turn of events. "We are all shocked by the news," said Yang Cheng, the manager of the city's only Hummer dealer.
A group of Chinese reporters gathered outside the gates of Tengzhong's headquarters, hoping to gather nuggets of information about a company that few knew much about. Guards checked all trucks arriving and departing, allowing them through by opening metal accordion gates and removing metal barricades.
There is no corporate name or logo visible from outside the headquarters complex. The lone sign on one building visible from the front gate -- in black letters against yellow background -- exhorts uniformed workers, "Let the World copy us!"—Ellen Zhu contributed to this article.
Write to Norihiko Shirouzu at norihiko.shirouzu@wsj.com